Form 5310

[Guest ladycpa]

I have a client who is terminating a profit sharing plan that has been in existence since 1985. On the Form 5310, they ask for the reason for termination. In this case, the plan sponsor is just tired of dealing with it. Does anyone have any experience with just attaching a statement that the plan has become an "administrative burden"? If so, how did the IRS respond?

[jpod]

For an old plan, it's not an issue. "Administrative burden" is fine.

[Blinky the 3-eyed Fish]

I have used "Business Decison" and never been questioned. I like it because it's generic and truthful.

[E as in ERISA]

If the plan had been a huge success with employees, then the employer would generally not terminate it even if it was an administrative burden. So there probably are other "business reasons" like lack of interest by employees that you could cite in addition to the administrative burden.

[Kirk Maldonado]

I've never heard of the IRS challenging any reason for terminating a plan. I've always been tempted to try "the plan fiduciary was abducted by alien creatures."

[mbozek]

lack of interest or too many govt rules is ok. Plans in existance more than 10 years do not need a reason for terminaton-- I would ignore the question.

[jpod]

NO - Do not ignore the question, but it really does not matter how you answer it.

[Blinky the 3-eyed Fish]

I think I am going to take Kirk's answer and add "purple monkey dishwasher" to it.

[BTH]

Recently, we filed a 5310 for a Profit Sharing Plan where we indicated that the business' adverse business conditions didn't allow it to continue to fund or maintain the Plan. The business had been in bad shape for a number of years and no contributions had been made since the mid-90's.

The IRS reviewer actually did come back and ask why no contributions had been made to the Plan, even though he acknowledged our adverse business conditions answer. While he may have been reviewing the contribution question on the 5310 and not necessarily the reason for termination, it does show that the IRS does actually look at this stuff sometimes.

BTH

[Kirk Maldonado]

BTH:

That is a perfect example of the maxim that "no good deed goes unpunished."